Celebrity entrepreneurs: The pros and cons of being famous before starting-up

Being a red carpet VIP is no guarantee for success in the world of business. Whilst many celebrities opt to put their brand on commercial products, such as cosmetics or jewellery, and continue with what has made them famous, some have decided to become outright entrepreneurs. Creating businesses and trying to stay involved long past the point of just being an ambassador...

Bringing the celebrity nametag to business has its pros and cons. Here are three celebrity entrepreneurs who have tried to become successful business people in their own right. Let’s see the impact fame has had on their ventures.

Jessica Alba

Like most successful business ideas, Jessica Alba came up with hers after being frustrated with a personal experience. When pregnant with her first daughter, Alba set out to make a healthy home for her child and bought products suitable for babies, including some “baby-safe” laundry detergent. After one load of laundry was washed in the detergent, Alba broke out in a rash. Realising that if she had such a bad allergic reaction, surely it couldn’t be good for her child too.

After researching why this was, Alba learned about untested toxic chemicals in everyday baby products and set out to change this, founding The Honest Company – a business making non-toxic baby and family products such as diapers and wipes. The Honest Company is now valued at just under $1billion and sells their products at Target, Whole Foods and Costco.

Interestingly, Alba admits her celebrity status has attributed to the company’s growth because of her long-lasting relationship with the media. Alba is able to leverage those relationships to bring The Honest Company into the limelight.

An example of this was during the launch of the company’s one-for-one campaign (for every crib sold, The Honest Company would donate one to a child in need), Alba went on The Ellen Show mentioning the new campaign and the cribs sold out as soon as the show was aired.

One frustration Alba found for being a celebrity was people immediately think any company she is associated with is an endorsement on her part and don’t think she came up with the idea, pitched it to an investor and grew it, which she actually did.

The Kardashians

Having a long-lasting relationship with the media doesn’t necessarily mean a business will do well. Whilst celebrities are able to leverage their media contacts to raise awareness for their business, this can actually backfire if the product isn’t high quality and do irreversible PR damage. If the entrepreneur wasn’t a celebrity, it is likely the media wouldn’t cover the story and allow the business time to improve their product without media attention.

An example of this is the Kardashian Kard, a pre-paid debit card aimed at young adults. The card charged heavy fees for use and even required adults to purchase the card in the first place.

The Kardashians came under so much scrutiny, which got picked up by the media and threatened to damage their public image, they had to pull the plug on the card. Even though other pre-paid cards in the market also have high fees, when there is such a well established ‘face’ behind a business, such as the Kardashians, any negative publicity a product receives will be forwarded onto the celebrity.

Ashton Kutcher

Ashton Kutcher made his name as a model and actor, but since has gone on to be a successful venture capital investor. Other high profile celebrities, such as Justin Bieber, have forayed into venture capital but few have built a better portfolio of investments than Kutcher and the early-stage fund he co-founded, A-Grade Investments. A-Grade have invested in many notable early-stage companies, including taxi app Uber, the anonymous online platform Secret and home-sharing app Airbnb.

There are a few key ingredients to Kutcher’s knack for spotting good investments. The first is simple – he knows his stuff in the tech space. Even before A-Grade Investments was founded, Kutcher made some solo investments into Foursquare and Skype, an investment he tripled his money with according to reports.

The second is Kutcher has developed an investment philosophy that he sticks to. "It’s all about whether what the tech is being put to actually solves a real world desire of people. If you find a way to help people find love, or health or friendship, the dollar will chase that."

Being a well known public figure has been a huge asset for Kutcher’s venture capital career. He is able to invest into the best start-ups, which all venture capital funds are fighting to also invest in, because of his public profile, social media following and network. Kutcher’s voice is an invaluable benefit for any start-up trying to raise awareness, giving him access to most of the investments he wants access to.

Conclusion

Starting off as a celebrity and transitioning over to entrepreneurship has some huge advantages. By being famous, celebrity entrepreneurs are able to use their public persona to generate new business. This is invaluable to any business starting out and looking to grow. Also, a celebrity will have already developed a community that is willing to support them, overlooking rival businesses, giving the business a competitive advantage.

However, if a celebrity entrepreneur doesn’t involve themselves with their business for the long-term, and instead opts for an endorsement, the public can choose not to support the business as they may view it as another celebrity jumping on the celebrity entrepreneur bandwagon. That said, if a celebrity is wanting to become a legitimate entrepreneur, their fame can certainly lead to business fortune.

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